A Potential Opportunity in Healthcare

Key points:

• After thirteen years of steady gains, the Healthcare sector has essentially traded sideways over the past four years
• Regarding the short-term, trader sentiment recently fell to a low enough level to flash a favorable contrarian signal, and seasonality is entering the most favorable time of the year for the Healthcare sector
• Additionally, corporate insiders have spent much of the last year heavily buying their own shares
• This combination of factors suggests the potential for strength in the very near-term, and better days ahead for the sector overall

Healthcare has been a laggard for years

For many years, the Healthcare sector was a source of steady growth and consistent price appreciation. But the bloom came off that rose in recent years. In the weekly price chart below for the State Street Health Care Select Sector SPDR ETF (XLV), we see a long, consistent rise from 2009 to 2022. We also see the choppy sideways action that has been the norm in the four years since then.

Ticker XLV is essentially unchanged from its April 2022 level. So, is this sector doomed to continue to languish? Or is there a potential for better days ahead? A variety of factors and data points suggest the latter.